BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER

Below are resources to help traders become their own trading coaches, improve their trading processes, and develop a positive work-life balance.  All the TraderFeed posts also contain links to valuable resources and perspectives.  

RADICAL RENEWAL - Free blog book on trading, psychology, spirituality, and leading a fulfilling life

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The Three Minute Trading Coach Videos

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Forbes Articles:

https://www.forbes.com/sites/brettsteenbarger/
  

My coaching work applies evidence-based psychological techniques (see my background and my book on the topic) to the improvement of productivity, quality of life, teamwork, leadership, hiring best practices, and creativity/idea generation.  An important part of the "solution-focused" approach that I write about is that we can often best grow by focusing on what we do well and how we do it--and then doing more of what works for us.  The key is to know our cognitive, interpersonal, and personality strengths and leverage those in the pursuit of performance. 

FURTHER RESOURCES

*  A Creative Way to Use TraderFeed 

*  Brett Steenbarger Bio

*  Brett's Books on Trading Psychology

I wish you the best of luck in your development as a trader and in your personal evolution.  In the end, those are one and the same:  paths to becoming who we already are when we are at our best.

Brett
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Mentoring: The Key to Developing as a Trader

 

11/21/24:  Here are two keys to successfully mentoring ourselves:

1) Process market activity and trading ideas in multiple ways in great detail:  talk them aloud, write them down, chart them, discuss them with others and listen to their reactions.  What we process many times in many ways, we are much more likely to internalize.  We mentor ourselves by guiding our own processes of preview, performance, and review.

2) Put energy and enthusiasm into the learning process: highlight the details that point to opportunity, focus on identifying and learning from what we've done well, treat mistakes as fuel for growth and learning.  The most positive development occurs in a positive mindset.

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I'm in the process of finishing my next book, tentatively titled Positive Trading Psychology.  The last chapter has been the most fun to write, because I've learned the most in writing it.  Nine mentors who work at SMB Capital submitted their best mentoring practices to be included in the text.  Even though I've worked with all of these mentors/traders personally, I found their ideas to be eye-opening.  Here are a few important lessons for developing traders that will be covered in detail in the book:

1) Seek Training, Not Just Education - Education is necessary for professional development and elite performance, but it is not sufficient.  Medical students begin their studies in the classroom, learning anatomy, physiology, etc, but they learn the practice of medicine by observing and helping senior students, interns, residents, and attending physicians.  Coursework and webinars cannot substitute for real-time experience under the guidance of a mentor.  The mantra in medical education is "see one, do one, teach one".  We develop expertise by observing masters at work, by tackling performance under supervision and guidance, and finally by cementing our skills by teaching others.

2)  Learn From Multiple Mentors - We begin by copying a master; we develop our own styles by absorbing the skills of multiple masters.  Copying the master brings us to a level of competence.  Synthesizing the learning from multiple mentors develops our own styles and brings us to a level of mastery.  Teaching others cements our learning and transforms mastery into expertise.  Too often, traders seek answers in a single video, podcast, or course.  Expertise comes from finding and cementing our answers, not by mimicking others.  There are no short cuts in the development of elite performance.

3)  The Best Learning Instills Optimal Trading Psychology - A mentor is not just someone who teaches you where to buy and sell.  An effective mentor models how to think about and pursue opportunity: how to blend risk prudence and reward maximization.  In teaching trading process, mentors inevitably model trading mindset.  We most effectively learn trading psychology in our pursuit of sound trading.  Great mentoring builds a positive trading psychology, as it establishes a sense of understanding and mastery.  We internalize optimal trading psychology when we ground ourselves in optimal trading process.

Most of all, the SMB mentors have taught me that the best teachers are always learning from their students.  The effective mentor-student relationship creates teamwork.  Mentors learn from the research and practice of their students just as the students learn from the instruction and guidance of mentors.  Great mentoring forms great teamwork, making everyone better--

Further Reading:

Three Questions to Ask About Any Market

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Becoming Solution-Focused in Our Trading

 

Added Note:  11/18/24:  Quite a few of the senior traders/mentors at SMB Capital are contributing best practices to my upcoming book.  What has become clear is that they don't just teach setups and risk management; they actually do those things with the developing traders on the trading floor.  One mentor described forming joint accounts with the developing traders, so that learning occurs in real time, with real money on the line for both teacher and student.  Notice how this is powerfully different from simply teaching trading techniques in live or online classes.  We learn trading solutions by seeing them applied--again and again--in real time with immediate feedback.  How we learn trading shapes our trading psychology.  

Additional Note:  11/13/24:  We can't be solution-focused in our trading if we're living our lives in problem-focused mode.  A solution-focused life means that we identify--every single day--what specific things we're doing to bring us energy, fulfillment, and success.  Working on our trading is fruitless if we're not working on ourselves.  Here's an article with links to assess our overall well-being and improve our positive psychology.  The goal is to maximize our happiness, life satisfaction, energy, and relationships.  If we are living full and fulfilling lives, we can readily handle the ups and downs of markets and trading performance.

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We give energy to what we focus on.

If we focus on negative outcomes, we energize our worries and fears.

If we focus on problems, we fuel our sense of being broken.

What is in your trading journal?  What is in your thoughts after a losing trade?

That is what you are energizing.

This is why it is so very important to focus on your best trading and learn from your successes.

When your trading problems are *not* occurring, that is often when you are doing something right.

Once you focus on what you're doing right, you become solution-focused.

Success follows when we identify our solutions and turn them into habits.

Suppose you identified one thing each day that you did well in your trading and made it a goal to repeat and extend the next day?

What we focus on each day compounds and becomes our reality.

No solution-focused trader has ever gone on tilt.

When we are solution-focused, we grow the best within us.

Further Reading:

Solution-Focused Trading

Keys to Solution-Focused Trading

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Trading Without Drama

 

Added comment (11/7/24):  In a video just posted, Jeff Holden and I teach a class for the SMB Training Program and address how to avoid trading on tilt.  Tilt always has a trigger.  If we rehearse trigger situations while placing ourselves in states of optimal focus, we defuse our negative triggers.  If we rehearse our A+ setups while placing ourselves in states of optimal focus, we create positive triggers.    

Additional note below:

What if we're looking for the wrong thing in our trading?

What if we're looking for "catalysts" and "breakouts" and bursts of volume and volatility, because that's where the action can be found?

What if, instead, we filtered our search for instruments that were trading in the most stable manner, following relatively unchanging trends and cycles?  

In that case, we would trade, not what moves the most, but what moves the most coherently and consistently.  We wouldn't be predicting in the face of uncertainty; we would be identifying in the face of stability.

If we trade the opportunities that are most predictable with the least drama, how might that impact our trading psychology?

Might our trade selection shape our trading psychology?

Perhaps logic starts where drama ends--

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Additional note - 11/5/24:  Notice something subtle.  Many traders attempt to use technical analysis tool for predictive purposes.  If we're trying to identify markets that are trading in regular, stable patterns, then the tools of technical analysis can be used to describe those patterns and help us align with those.  To the degree that the patterns indeed remain stable, that would bring some predictive benefit.  The main purpose of the technical tools, however, would be for trade idea generation, capturing the degree to which recent price action has followed stable cycles and trends (and, of course, cycles within trends).  

When I create charts where the bars are defined by volume traded, not time, this helps normalize the market's time series and makes it easier to use technical tools to identify stable patterns.  (Here's an interesting example from a few years ago; here's a relevant earlier post).  It's particularly enlightening when we can identify stable patterns over multiple time frames, aligning our ideas, an idea that Brian Shannon has emphasized in his work.

Further Reading:

A Framework for Trading and Trading Psychology

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Overcoming Emotional Trading in Real Time

 

Update:  My medical school colleagues and I wrote a chapter for a standard reference text in psychiatry that just came out.  It covers recent research and practice in short-term approaches to changing our thinking, feeling, and acting.  An important finding is that it takes emotion to change emotion.  We are most likely to internalize changes we make if we truly feel those changes.  One key implication for the topic below:  We can most efficiently and effectively change emotion in real time by evoking the *opposite* emotion, not by trying to make ourselves emotionless.  If we're frustrated and self-critical, instead of trying to empty our minds and meditate, we can evoke memories of trading experiences that left us feeling fulfilled and grateful.  More to come! - Brett  

We read a lot about trading psychology and the need to maintain perspective, trade our plans, control our emotions, accept losses and uncertainty, and manage our risk.  This education is helpful, but it is not training.  Actual training in trading psychology would have to occur in real time, because trading challenges crop up only when we are in certain states of mind and body.  This is why Jeff Holden and I have teamed up for SMB Capital's training program to help traders coach themselves in the heat of battle.  This is going to be a multi-week collaboration, in which we integrate the discussion of markets and trades with hands-on work on our mindsets.

Here is the video from our first class.  

A major idea from the session is that, before we can change our emotional state, we need to be aware of our state.  Jeff presented a "mood meter" that enables us to place labels on what we're experiencing.  As I point out in the video, the very act of identifying what we're feeling enables us to be an observer of our experience--not one who is wrapped up in their experience.  This coming Thursday midday, we'll discuss--in the context of the market trade that morning--what to do once we observe our emotions, so that we can stay constructively engaged in our trading.  I look forward to getting a video for that session as well.

Now here's an important point that we rarely encounter.  It comes from the book I'm currently writing, which integrates positive psychology and trading psychology:

Awareness of our positive emotional states is every bit as important to our trading as awareness of our frustration and negativity.

If we are aware of the emotional signs that accompany our best trades--our feelings of understanding and confidence--that awareness helps us take larger risk when the expected value of our trades is best.  We have positive triggers for our best trading just as we have triggers that set off our worst trading.  Recognizing our positive triggers in real time enables us to make the most of the opportunities that present themselves.  This is why it's important that our "mood meters" capture the best as well as the worst of our trading experience.  

More to come!

Brett  

How To Coach Yourself To Trading Success

 

Update:  During Thursday's session, Jeff reviewed with the group the chart of emotions that described four quadrants at the intersection of two axes:  positive and negative; high and low energy.  We also discussed the very center of the chart as our state of focus.  The idea is that, when we're super focused on markets, we're not immersed in either positive or negative feelings.  At that point, it's not about us.  So the question becomes:  how do we reach and sustain that center point?  The first step is self-awareness:  simply to know what we're experiencing in the present and to be an observer of our emotional state, not immersed in what we're feeling.  An initial exercise in this direction is to write down what we're feeling when we're feeling it.  By observing ourselves, we are exercising (self) focus.  Next week we will build on this-- 

This Thursday, I will join the head of recruiting for SMB Capital, Jeff Holden, for a combined mentoring/coaching class with developing traders.  What will be unique to the session is that I will be presenting and teaching coaching skills to the traders at the same time that Jeff presents and teaches best trading practices for that day's trade.  To the best of my knowledge, this will be the first time that the skills of trading psychology are taught alongside the skills of consistently profitable trading in the context of a live market session.  Once we've held the session for SMB students, I will share the specific methods we talked about in an update to this blog post.  The goal is to go beyond coaching advice and provide specific tools for TraderFeed readers to coach themselves to trading success.  

As Coach K indicates above, the key to elite performance is hungering for excellence, not success.  We can't always win, but we can always learn and learn and practice and practice excellent ways to play the game.  Back in the mid-1970s, I had the honor of being part of the freshman basketball team at Duke.  The coach ended quite a few of the evening practice sessions with an exercise where each player had to hit 10 consecutive free throws before they could go home.  You can imagine, tired and sweaty and needing to get homework done, how the players desperately wanted to get home.  That put real pressure on their free throws.  Over the course of the season, they had practiced doing the right things at the charity stripe so often under duress that they didn't wilt when it came to clutch situations at game time.  They achieved excellence by practicing under the emotional conditions of actual performance.

Now imagine that you couldn't leave your trade station after the market close until you had traded that day's market successfully in replay mode.  Again and again, you'd replay the market and push yourself to stay in the right mindset and take the right actions.  Day after day, those reps would eventually become part of you and you'd internalize sound trading psychology at the same time that you internalized sound trading.  

Stay tuned to this blog post after Thursday morning's session with Jeff.  I'll share the methods I discussed with the developing traders and I'll highlight how you can best rehearse these methods to coach yourself effectively.  This should be fun--

Brett    

Why Can't I Improve My Trading?

 

Think of how many trading courses are out there.  Consider how many trading and trading psychology books have been written.  Trading videos, tweets, interviews, podcasts:  the amount of content related to trading success is phenomenal.  And every week we get more and more and more.  Traders I hear from read books, watch videos, take courses--and they wonder, "Why can't I improve my trading?"

To address this question, I'll offer an analogy:

I could write chapters on how to pack, wear, and deploy a parachute.  I could produce videos on proper parachute maintenance and use.  I could teach a parachute course.  Now suppose you consumed all of the content I created on how to master the parachute and then you jumped out of a helicopter with your parachute.

How would you fare?

Of course, in the military, you learn to properly pack a parachute by packing parachutes and getting first hand instruction and inspection.  You learn to deploy a parachute by being tied to a line from a height and then dropping:  first at relatively low heights, then at higher heights.  You deploy the parachute again and again during real drops that are completely safe before you tackle riskier jumps.

The reason for this is that learning is state-dependent.  We are most likely to recall information and enact skills when we are in the state that we were in during our learning.  If we learn parachuting skills when we are calm and collected in a classroom, we're unlikely to recruit those skills when we're making a leap and the adrenaline is flowing.

Traders typically learn trading techniques and get psychological coaching when they are very far from the heat of battle.  Everything they learn flies out the window when markets are moving and there's real risk and reward every moment.  

We can't learn to drive racecars by watching videos, reading books, or absorbing tweets.

We can't learn combat skills in wartime by staying safe and peaceful in a classroom.  We can't master our upheavals of trading psychology when we're quiet and comfortable outside of market hours.

The best trading education and trading psychology is processed in real-time, in the act of trading.  We learn best by acquiring and practicing skills when we're in the mental, emotional, and physical states of real performance.  Our best teacher is realistic, progressive simulation.

For trading psychology, this is a game-changing insight.  More to come--

Further Reading:

Using Your Body to Program Your Mind

Overcoming the Triggers to Poor Trading

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Should I Join a Prop Trading Firm or Trading Community?

 

In recent weeks, I've had a number of traders reach out to me, asking about joining proprietary (prop) trading firms or joining trading communities.  Here is the essence of my response:

*  There is value in learning trading and developing trading skills and experience when you can learn from the experiences of others.  The best trading firms that I work with operate with team structures where there is a commitment to help each other and learn from each other.  Having trading partners can increase our accountability, and it can provide us with multiple role models.  Simply being online with other traders is not team trading.  Go where traders are committed to one another.

*  The best trading organizations only succeed and make money if their traders succeed and make money.  When I began my work in Chicago, the best prop firms covered basic overhead with desk fees and passed along member firm commission rates to traders.  Those firms shared profits with successful traders.  They did not succeed if traders were not profitable.  They invested in the best trading technology, because that would make the traders--and the firm--successful.     

*  You should be encouraged to make money, not simply to trade.  Other prop firms in Chicago operated as arcades, where traders traded their own capital, kept most of their profits, and paid fees for access to equipment and technology.  Some charged high commissions and made the bulk of their money by getting traders to place lots of trades.  When traders pulled back their risk taking due to uncertainty, this became a problem for management.  The interests of the firm and the traders did not always align.

*  Beware firms selling hope as their main product.  Some prop firms are not really prop firms at all, as they promise access to capital based upon tryouts that traders pay for.  The conditions of the tryouts are quite challenging, and it's not unusual for aspiring traders to engage in multiple tryouts.  Often, the interests of some of these firms are in selling tryouts, not in funding and growing successful traders.  Is there real training, real performance feedback, and real teamwork among participants?  Does the firm's growth depend upon the success of those who pass the tryouts?

*  Seek interactivity.  Online trading communities often offer education and coaching as well as sharing among community members.  This can greatly broaden the learning of developing traders.  The key question in evaluating online trading communities is the degree to which members actually form virtual teams and make teamwork a daily part of their trading processes.  If the communities succeed mostly by selling memberships and services, they cannot foster the mutual learning and development essential to our learning curves.

A quick anecdote:  Tomorrow, I'll be joining Jeff Holden from SMB Capital to help traders make use of a new technology that tracks the expected value of trades in real time.  This can be of tremendous value in sizing positions appropriately and in helping traders grow their risk-taking in responsible ways.  SMB is training the traders to take better risk/reward trades and they are investing in the technology so that the firm will succeed as the traders become more successful. 

Be selective:  The right firms and communities treat you as an investment, not as a trade--

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Two Paths to Trading Success

 

There are two very distinctive paths to trading success:

The first path is to study market action in great detail and identify patterns associated with large market moves.  When those set up, the successful trader has seen and charted so many of those examples that they can pounce on the opportunity with large size.  Also because the successful trader has observed so many explosive moves, they are sensitive to when the explosion is *not* occurring and can exit with controlled risk.  For this kind of trader, a key psychological strength is patience.  Much of success lies in not trading until the outstanding opportunity comes along.  Another important psychological strength is aggression.  The very successful trader is not just right, but recognizes when they are right and is able to go for it in size.

The second path to great market success is to trade broad rather than big.  This is the path of many successful hedge fund managers.  They search and search and research and research and look for opportunities in different markets, in different parts of the world, and in different time frames.  None of the positions are necessarily very large, but the combination of the positions makes for a sizable portfolio.  Because the opportunities are relatively uncorrelated, the trader can make large amounts of money even when some views don't play out.  The broad trader is placing so many bets with edge that consistent returns follow.

Team structures help the first path to success, as a recent video from SMB Capital indicates.  Having multiple eyes on the short-term price action of many stocks and markets increases the odds of finding the truly special opportunities.

Team structures are essential to the second path to success, because team members with different areas of expertise and experience contribute unique ideas to a broad portfolio.

You can win by trading big.  You can win by trading broad.  It's tough to win trading in isolation.

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How Gratitude Transforms Trading

 

A wealth of research finds that experiences of gratitude--feeling appreciative of what we have--are important to overall emotional and physical well-being.  Of special significance is research that gratitude impacts our brain activity over long time periods, activating the areas responsible for reasoning and problem-solving.  This fits well with research that shows how positive emotional experience helps us see the world more broadly and deeply.  

When we can turn trading mistakes and setbacks into valuable lessons for learning and growth, we can actually feel gratitude toward our challenges.  Once we're focused on our development, everything--our best trading and our worst--becomes fuel for getting better and better.  Amazingly, when we sustain that positive mind frame, we actually see more in markets.  

Negativity blinds us to trading opportunity.

Including gratitude in our daily review process by focusing on experiences that make us better is a great way of sustaining our positive trading psychology.  At moments when I feel frustrated, I look over to our bonded rescue cats, Molly and Ares, see how they have found happiness, and feel grateful for the opportunity to have given them a good life.  Frustrations melt away when we appreciate what we have.  

An optimal trading psychology is one of focus and one of positivity.  Amazingly, when we are highly focused and in a state of emotional and physical well-being, we see markets better and make more clear-headed decisions.  If trading brings us gratitude--even in challenging times--we'll be best prepared to find and exploit opportunity.

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Three Questions to Ask About Your Positive Trading Psychology

 

The book that I'm currently writing, covering the positive psychology of trading, emphasizes that how we approach trading determines how positive our trading experiences become--and that helps determine our trading success.  Too often, people pursue happiness and fulfillment by seeking trading success.  The field of positive psychology suggests the reverse:  if our trading practices and processes draw upon our strengths and what is meaningful to us, we will trade with greater focus and energy, see more in markets, and interact more effectively with peer traders.  

So much of traditional trading psychology is problem-focused, emphasizing what we need to do to avoid reactive, emotional trading; what we need to do to accept risk and handle drawdowns, etc.  The reality is that we will never achieve a peak performance state simply by shoring up weaknesses.  Three questions to ask with respect to our achievement of a positive trading psychology are:

1)  Are my trading processes well-defined, and do they consistently draw upon my personality, social, and information processing strengths?  (Do I truly understand what my strengths are and how my trading methods draw upon those?)

2)  Do I find energy and fulfillment in the processes of trading regardless of near-term P/L?

3)  Do I draw upon the strengths of others and contribute to their strengths so that I am continually learning and improving?

We achieve a peak trading psychology by making our trading an expression of our greatest talents, skills, and ideals. 

Somewhere, hidden in your best trading, is the trader you're meant to be.  

The challenge is to develop a close relationship with your best self.

Further Reading:

Mastering the Positive Psychology of Trading

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